Dow Jones Hit With Sell Signal

 | Feb 02, 2014 06:30AM ET

h2 Friday action leaves Dow Jones Industrial Average down for January and with a “sell” signal

As January drew to a close, the Dow Jones Industrial Average (DIA) and other major global stock market indexes registered losses for the month.

U.S. stocks posted a down week and a down January as investors fretted over poor earnings reports, weakness in emerging markets and the ongoing tapering of the Federal Reserve’s bond buying program.

For the month, the Dow Jones Industrial Average (DIA) lost 5.2%, the Nasdaq (QQQ) dipped 1.7% and the SP500 (SPY) gave up 3.6%.

Overall, a down January can be a bad omen for stock markets as the StockTraders Almanac’s “January Barometer” says that “as goes January, so goes the year.”

The earnings season thus far has been mediocre, at best, and Amazon (AMZN) continued the parade of weaker than expected reports on Friday with the stock falling 11%.

Emerging markets and Europe were also weak with iShares Emerging Market ETF (EEM) falling 7.9% for the month and iShares MSCI EAFE (EFA) 5.4% off late 2014 highs.

h2  On My Stock Market Radar/h2

The Dow Jones Industrial Average (DIA) shows significant technical damage as a result of January’s action.

In the point and figure chart below, we can see that the Dow Jones Industrial Average (DIA) registered a new “sell” signal on Friday with a bearish price objective of 14,950, approximately 4.7% below current levels.  A drop below the blue line at the 15,250 level would indicate a larger correction and the start of a new bear market according to point and figure charting methodology.